The Arrival of Quantum Computing - Threat to Bitcoin?

IBM has recently announced that it has opened up its 5-qubit quantum computer to the general public. Has quantum computing finally arrived and what impact will it have on Bitcoin?

Quantum computers

Quantum computers represent a new paradigm in computing.

While traditional digital computers store data in binary bits (zero or one), quantum computers store data in the form of qubits (where 2 data states can be superimposed.).

This enables large scale quantum computers to solve certain mathematical problems in a much more efficient way compared to traditional computers.

Asymmetric cryptography - the key to Bitcoin

The Bitcoin protocol uses asymmetric cryptography to ensure that bitcoins can only be spent by their rightful owner. Transactions signed by a private key can be verified using the corresponding public key.

Brute forcing private keys corresponding to a given public key using currently available computers is infeasible. While bitcoins have been lost by users to hackers, it is mainly due to the unsafe security practices of users.

However, asymmetric cryptography is one of the problems that can be solved efficiently by an effective quantum computer.

Effective quantum computers not imminent

The power of quantum computers increases exponentially with the increase in number of qubits. The processor built by IBM is a 5-qubit processor, which is great to demonstrate the concept of quantum computing.

The real power of quantum computing can be unleashed only when the number of qubits increases.

According to The Economist, a 300-qubit quantum computer can have more possible states than the number of atoms in this universe. These computers are, however, some time away from being built.

Bitcoin can evolve to tackle this threat

Even if effective quantum computers are created, it is unlikely that this threat would materialize overnight.

Hence, there could be a transition to a quantum-resistant algorithm in an orderly manner. The Bitcoin protocol could incorporate a new algorithm to be implemented after a certain block number, by which time all nodes would have to update the software they run.

Dustin Moody, mathematician at National Institute of Standards and Technology (NIST), says:

"There has been a lot of research into quantum computers in recent years, and everyone from major computer companies to the government want their cryptographic algorithms to be what we call 'quantum resistant'. So if and when someone does build a large-scale quantum computer, we want to have algorithms in place that it can't crack."

Effective quantum computers – other implications

Cryptography is prevalent everywhere and is used for encrypting messages, emails as well as other forms of data. Banks use cryptography as well, although in a centralized manner.

Hence if quantum computers capable of breaking Bitcoin are indeed developed, they would also be a risk to banks and would have far reaching consequences.